Budget 2007: A fig leaf to cover up yet more stealth grabs

Last updated at 16:06 21 March 2007

Tax cuts from Gordon Brown are never quite what they seem.

The grand finalè of his speech today was to announce a 2p cut in the standard rate of income tax from next year - something which momentarily stunned the Opposition because it has been widely accepted that public finances are so tight there was no money to give to anyone.

It is a sign of his Machiavellian genius - if not his Stalinist tendencies - that most middle class people will still end up paying more. Mr Brown is merely promising to give back tomorrow rather less than he is taking away. He does this in two ways. First the top rate of national insurance is currently slightly less that the starting rate for the 40 per cent band of income tax, but tucked in today's speech was a comment that he proposed to align the two rates.

It means that people have to pay more because they continue to pay National Insurance - which takes some 10 per cent of income at that level on a further slice of money. That measure alone would probably pay for the standard rate cut but there is more. Another of his tidying up measures has been to abolish the 10p in the pound starting rate for income tax - a measure he himself introduced early in his reign.

It is likely therefore that though the standard rate will be cut, people will start paying it at the level where hitherto they have been paying at 10p - so the effect will be again that they are paying significantly more.

Add in the fact that with inflation everybody's income in money terms goes up, so they move into higher tax bands, and therefore more of their income is taxed at higher rates, and it becomes clear this great tax bonus is little more than the fig leaf used to cover up yet more stealth taxes.